RE: I kept saying it29 Jun 2019 10:30
Surely Gary, this warms your heart....
. (It takes a couple of re reads :))
observer842
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Price: 0.138
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RE: Sonora Lithium Project20 May '19
Perhaps the arrangement is that GFL and BCN will own the Sonora Lithium Project (via Sonora Lithium LTD) covering the MSB and Mexilit tenements, eventually this is expected to be a 50:50 partnership, but since GFL will own approximately 30% of BCN they will have effective control. We would not be involved in that arrangement. However, we would be involved when it came to paying a fair price to access the material from the LV and JV tenements.
We've discussed the drivers which could influence a fair price previously when GFL weren't involved. In which case it was in BCN's interests to pay peanuts to access the material held in both the JV's and LV's. But with GFL involved this is no longer the case: To maximise profit to BCN shareholders (rather than GFL ones) it should be in BCN's interests to maximise the price it can command from the material in the LV's and JV's - which should benefit us too.
For the LV it is probably obvious. For the JV perhaps not so much. An example or two always helps ;-)
If (a hypothetical) £100 was paid for each unit of run of mine from the JV. £30 would go to KDNC. £70 to MSB which is owned 99.9% by BCN. If the processed value of that unit was £1000, then of the remaining £900 of additional value £450 would go to BCN and £450 to GFL.
Of the £1000 total, KDNC get's £30, BCN gets £520 (£70 + £450) and GFL gets £450. Because GFL owns 30% of BCN they also benefit from an additional £156 (30% of £520) = £606
Now consider who benefits more if the original price is higher.
If (a hypothetical) £200 was paid for each unit of run of mine from the JV. £60 would go to KDNC. £140 to MSB which is owned 99.9% by BCN. If the processed value of that unit was £1000, then of the remaining £800 of additional value £400 would go to BCN and £400 to GFL.
Of the £1000 total, KDNC get's £60, BCN gets £540 (£140 + £400) and GFL gets £400. Because GFL owns 30% of BCN they also benefit from an additional £162 (30% of £540) = £562
Higher still:
If (a hypothetical) £500 was paid for each unit of run of mine from the JV. £150 would go to KDNC. £350 to MSB which is owned 99.9% by BCN. If the true value of that unit was £1000, then of the remaining £500 of additional value £250 would go to BCN and £250 to GFL.
Of the £1000 total, KDNC get's £150, BCN gets £600 (£350 + £250) and GFL gets £250. Because GFL owns 30% of BCN they also benefit from an additional £180 (30% of £600) = £430
I'm liking this deal! ;-)
Ob.
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